You know the drill... You can refer back to chapters 10 & 11 for a format for this wiki page.
The Purchasing Process:
This process explores the purchasing process in detail. We will examine supply chain management (SCM); technologies supporting this process;and various models of this process (DFD's, ERD's & system flowcharts). Also, we will examine the Control Matrix for the purchasing process. Purchasing Process Activities:
Handling the repetitive work routines of the purchasing & receiving departments
Supporting decision needs of the managers
Assisting in the preparation of reports, both external & internal
Definition: the formal process of buying goods and services; an interacting structure of people, equipment, methods,and controls designed to accomplish the abovementioned activities.
Horizontal Information Flows (see figure 12.1):
1. A purchase requisition is sent to purchasing from the inventory control dept. (or various other departments) requesting a purchase of goods or services.
2. A purchase order is sent to the vendor (by mail or electronically). A purchase order (PO) notice is sent to A/P, receiving, and the original requestor of the purchase informing them of that a PO has been sent.
3. The receiving dept. receives a packing slip (along with the goods ordered) from the vendor.
4. After matching the goods & packing slip with the PO earlier, the receiving dept. sends a stock notice (along with the goods) to the warehouse.
5. The receiving dept. informs A/P, general ledger, and purchasing that goods have been received by sending a receipt notice.
A/P - matches the PO notice and receipt notice with the vendor notice when it's received to ensure the invoice is accurate and valid.
G/L - uses the receipt notice to increase the inventory in the general leadger (accounts payable cannot be adjusted until a vender invoice is received).
Purchasing - "closes" the PO after receiving the receipt notice
Technologies Supporting the Purchasing Process:
1. Continuous Replenishment (CRP)
- A vendor obtains a buyer's current sales demand and inventory data in real time and replenishes the buyer's inventory.
2. Co-managed Inventory
- The vendor replenishes standard mechandise and the buyer manages the replenishment of promotion merchadise.
3. Collaborative Forecasting and Replenishment (CFAR)
- Retailer and manufacturer forecast demand schedule production jointly.
4. Collaborative Planning Forecasting and Replenishment (CPFR)
- Collaborative processes across the supply chain using a set of processes and technology models.
Logical Data Descriptions for the Purchasing Process at a Glance Inventory master data: discussed in chapter 10 Vendor Master Data: contains a record of each vendor that is approved for use by the organization. Stores vendor info such as name and address as well as data that could be used to evaluate vendor performance Purchase requisitions data: where internal requests for goods and services (purhcases requisitions) are stored Purchase order master data: complilation of open p.o. and includes the status of each item on order Purchase receipts data: event data store with each record reflecting a receipt of goods and services
Additional Control Plans for Purchasing Process
Approve Purchase Requisition – to ensure purchase is within the budget and the items are desirable
Use Authorized Vendor Data – to ensure the vendor is suitable for the organizations needs.
Independent Vendor Master Data Maintenance – separation of duties between person who is authorized to enter vendor data and person who is creating and approving purchase orders. This is very important because if this control does not exist, then the AP clerk could enter a fictitious vendor or a vendor that they are in collaboration with and defraud the company.
Compare vendor for favorable prices, terms, quality and product availability. It is unlikely that any one vendor will have the highest quality, lowest price, most favorable terms, and fastest shipping and most product availability. Therefore, the company needs to determine what the most important criteria are and select a vendor accordingly. For example, while obtaining the lowest price may be nice, the quality or speed of delivery may be more important.
Approve Purchase Orders – ensures that appropriate supplier has been selected and correct goods and quantities are being purchased. Many times the purchasing department is tempted to purchase very large quantities of goods in order to take advantage of a volume discount. However, this may actually cost the company more in storage and handling costs than the amount of money saved by the volume discount.
Confirm PO to Requesting Department
Independent Authorization to Record Receipt – Compare receipt to PO master data to determine that an approved PO is on file and the correct goods have been received
Inspect goods – ensure that correct goods are received in acceptable condition. If the goods are damaged, the company should contact the vendor and ask for a credit memo adjustment on the invoice so that they don't have to pay for damaged goods.
Fraud and the Purchasing Function
An employee places purchase orders with a particular vendor(s) in exchange for remuneratio
An employee has a conflict of interest between his responsibilities to the employer and financial interests in a company the employer does business with
The Purchasing Process:This process explores the purchasing process in detail. We will examine supply chain management (SCM); technologies supporting this process;and various models of this process (DFD's, ERD's & system flowcharts). Also, we will examine the Control Matrix for the purchasing process.
Purchasing Process Activities:
- Handling the repetitive work routines of the purchasing & receiving departments
- Supporting decision needs of the managers
- Assisting in the preparation of reports, both external & internal
Definition: the formal process of buying goods and services; an interacting structure of people, equipment, methods,and controls designed to accomplish the abovementioned activities.Horizontal Information Flows (see figure 12.1):
1. A purchase requisition is sent to purchasing from the inventory control dept. (or various other departments) requesting a purchase of goods or services.
2. A purchase order is sent to the vendor (by mail or electronically). A purchase order (PO) notice is sent to A/P, receiving, and the original requestor of the purchase informing them of that a PO has been sent.
3. The receiving dept. receives a packing slip (along with the goods ordered) from the vendor.
4. After matching the goods & packing slip with the PO earlier, the receiving dept. sends a stock notice (along with the goods) to the warehouse.
5. The receiving dept. informs A/P, general ledger, and purchasing that goods have been received by sending a receipt notice.
A/P - matches the PO notice and receipt notice with the vendor notice when it's received to ensure the invoice is accurate and valid.
G/L - uses the receipt notice to increase the inventory in the general leadger (accounts payable cannot be adjusted until a vender invoice is received).
Purchasing - "closes" the PO after receiving the receipt notice
Technologies Supporting the Purchasing Process:
1. Continuous Replenishment (CRP)
- A vendor obtains a buyer's current sales demand and inventory data in real time and replenishes the buyer's inventory.
2. Co-managed Inventory
- The vendor replenishes standard mechandise and the buyer manages the replenishment of promotion merchadise.
3. Collaborative Forecasting and Replenishment (CFAR)
- Retailer and manufacturer forecast demand schedule production jointly.
4. Collaborative Planning Forecasting and Replenishment (CPFR)
- Collaborative processes across the supply chain using a set of processes and technology models.
Logical Data Descriptions for the Purchasing Process at a Glance
Inventory master data: discussed in chapter 10
Vendor Master Data: contains a record of each vendor that is approved for use by the organization. Stores vendor info such as name and address as well as data that could be used to evaluate vendor performance
Purchase requisitions data: where internal requests for goods and services (purhcases requisitions) are stored
Purchase order master data: complilation of open p.o. and includes the status of each item on order
Purchase receipts data: event data store with each record reflecting a receipt of goods and services
Additional Control Plans for Purchasing Process
Fraud and the Purchasing Function